Financial Industry Betting Big on Innovation

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HSBC (pictured in Hong Kong) prepares for the future. Photo: Lip Jin Lee

There’s been a huge wave of investment in finance and banking innovation over the last few years and the biggest players are making sure they won’t get left behind.

The big news yesterday was that of HSBC, which announced that it would be cutting up to 50,000 jobs (on top of the 37,000 jobs cut since 2011). It’s been a tough few years for the world’s biggest banks given changes in the regulatory and business environment. As compliance costs have increased, banks, including HSBC, have had to trim riskier departments.

But buried within the announcement was another key tidbit: HSBC will spend $1 billion on improving its “digital and automation programs,” according to the Wall Street Journal. Banks aren’t just trimming down, they’re actively investing in a digital future.

HSBC is hardly the only one. Other recent examples include:

  1. Deutsche BankLast week, Germany’s largest bank announced that it was partnering with technology companies to open three “innovation labs” around the world: Berlin/Microsoft, London/HCL, and Silicon Valley/IBM. The move will be accompanied by EUR 1 billion on so-called “digital initiatives” over the next five years.
  2. UBSThe Swiss bank announced in April that it was opening a “blockchain research lab” in London to explore the merits of so-called blockchain technology in the context of financial services, with Chief Information Officer Oliver Bussmann noting that these emerging innovations could “not only change the way we do payments but it will change the whole trading and settlement topic.”
  3. NasdaqThe US exchange operator recently revealed its plans to trial distributed ledgers to power securities settlement for private equities. CEO Bob Greifeld wants Nasdaq to be “a leader in the field and is a “big believer” in the power of new emerging technologies “to effect fundamental change in the infrastructure of the financial services industry.”
  4. CME GroupDerivatives and futures exchange operator CME Group announced last year that it was looking to, according to Crain’s Chicago Business, that it was “looking to develop a pipeline to technology trends that could spark new businesses.” In a blog post last month, Rumi Morales, executive director of the Strategic Investment Group, wrote that, “among the technologies that will transform the financial services sector in the future, real-time payments is entering stage-right.” [CME Group is an investor in Ripple Labs.]

Those are just a handful of examples. In fairness, it shouldn’t be much of a surprise that banks are adapting. The biggest banks have always been technologically astute. As Business Insider pointed out the other week, Goldman Sachs is, in a sense, a tech company, with more engineers and programmers than Facebook, LinkedIn, and Twitter.

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